GST and Ecommerce Trigger 45,000Cr Investment in Storage and Warehousing Sector
According to JLL, a global and India's largest real estate services firm, it is estimated that close to Rs 45,000 crores (Cr) will be invested in creating storage facilities across India from 2018 to 2020. In these three years, different categories of warehousing will also create jobs to the tune of 200,000 at different levels of specifications and specialisations. Warehousing will witness the highest investment; over Rs 35,000 crore in the next three years, mostly in creating storage facilities for retail and consumer goods. Cold Storage and agricultural warehousing will see approximately Rs 7,500 crore. These two aspects of warehousing will lead the way in the future as they contribute greatly to regular living and lifestyle. Container storage may end up attracting approximately Rs 500 crore during the same period mostly to boost India's logistical prowess.
The report notes that the two prominent changes that have created significant growth prospects in warehousing are firstly the implementation of GST in India and creating a unified taxation, and the rapid growth of ecommerce necessitating building of large scale warehousing across various locations.
Ramesh Nair, CEO and country head, JLL India, said, "Warehouse and logistics is one of the biggest growth areas that has emerged in recent times. We have seen Rs 125,000 crore invested through private equity (PE) in warehousing space since 2014. While it made up approximately 10 percent of total PE investment in 2017, the share is expected to grow claiming larger share of investment. India's logistics and warehousing sector is rapidly transitioning through a revolutionary phase. There have been multiple initiatives associated with large investments (both domestic and international) within this segment, clearly underscoring the upcoming trend."
What has necessitated a sharp growth in warehousing in the country is the growth in ecommerce and a shortening turnaround time for delivery. Apart from ecommerce, the next big sectors of space are the electronic and white goods that command significant warehousing spaces in urban and semi-urban locations. These are also sectors that, despite their incremental requirements in warehousing, are averse to owning requisite space, therefore mostly reliant on third party warehousing facilities. It is estimated that Grade A and B warehousing stock will grow at a CAGR of 21 percent year-on-year taking the total tally of warehouse space in India to 247 million square feet by the end of 2020 almost doubling the current warehousing stock of 139.8 million square feet in 2017.
It is further estimated that the prime beneficiaries of the new wave of growth in warehousing will be the peripheral locations of tier 1 and tier 2 cities. This investment comes on the back of nearly Rs 10,000 crore invested in 2017 alone.
According to JLL’s analysis estimating the potential of various locations as strong warehousing centers in the future, aside from metropolitan and tier 1 locations are Surat, Kanpur/ Lucknow, Ranchi, Madurai, Coimbatore, Ludhiana/Ambala, Tiruchirapalli, Nasik, Madurai and Jaipur.
Amongst the tier 2 cities, these cities have shown potential for strong growth that will allow them to emerge as warehousing hubs in a hub and spoke model. These cities are strategically located to be in proximity to other major markets and allow transportation to happen to their feeder locations in less than six hours. These cities have the added benefit of favorable policies for setting up businesses and have high manufacturing potential.